We have recently completed our 3d Annual Danish IT Outsourcing (ITO) vs In-House Development Survey 2012 and are ready to share its most thought-provoking findings with you. The survey was conducted between April 17 and May 31, 2012 and was completed by the 695 Danish companies, of which 382 were IT / software development outsourcing companies and 313 – companies developing their IT solutions in-house.

Recapping the results:

Top three drivers of IT Outsourcing in Denmark:

Reduction of operating costs (OPEX)

Focus on core competences and business development

Time-to-market (TTM) acceleration

Top three most decisive factors in the choice of an ITO destination among the Danish companies are:

The available vast IT talent pool

Proficient English language skills

Low costs in general

Top three most decisive factors in the choice of an ITO partner in Denmark are:

Successful test / pilot project completion

Flexible contract terms

Positive references from industry peers

Top three challenges of the outsourced software development:

Poor communication with vendor’s project management / executive teams

Cultural difference

Lack of appropriate resources on ITO vendor’s side

Top 3 ITO business models:

Project outsourcing (fixed price / time and material)

Own software development team

Dedicated Development Center

Nearshore (close to / up to 2 time zones away from Denmark) remains the most popular outsourcing destination (cited by 47% of survey respondents, which is up 10% from 2011). Offshore (2+ time zones away from Denmark) remains the second most popular outsourcing destination (cited by almost 44% of companies, which is up 16% from last year).

The 2011 Danish IT Outsourcing and In-House Software Development Survey demonstrates an increasing demand for ITO services from high-tech startups and the SME sector actors as well as diverse industry niches, both “traditional” such as finance and construction and innovative such as digital media, online gaming and mobile computing.

Many Danish businesses adopted the outsourced IT / software development at the time of the economic meltdown in order to “keep the head above water” via the decreased IT budgets and operating costs and continue using it now, both for cost leverage and enhanced business focus purposes. On the other hand, there is another huge segment of companies that adopted ITO less than 12 months ago driven by the shortage of appropriate IT resources within Denmark.

Close-up analysis of the survey findings suggests that although a lot of Danish outsourcers seem to be positive about the essential use of outsourcing, there is still the evidence of inconsistency in what they tend to achieve via the ITO engagement.

In-house development companies continue to face the same challenges that drove/drive their peers and/or competitors to outsource: scarce local IT talent pool, high cost of domestic resources, slow time-to-market, pressing customers and investors etc. A significant number of the survey participants already view outsourcing as an inevitable practice to be used as a response to their in-house development issues in the future.